Global bond yields spike on inflation fears

What happened: Global bond yields surged on May 21, 2026, driven by escalating inflation fears. U.S. 10-year Treasury yields climbed to 4.6173%, while UK 10-year gilt yields hit 5.081%, the highest since the 2008 financial crisis. Mortgage rates also jumped, with 30-year U.S. rates surpassing 6.5%. This sell-off was fueled by concerns over persistent inflation, geopolitical tensions in Iran, and political instability in the UK.

Market impact: Stock markets reacted negatively, with the S&P 500, Dow Jones, and Nasdaq all closing down over 1%. Bond ETFs sold off, while inflation-linked funds like TIPS ETFs gained traction. Small-cap stocks and UK Gilts were particularly hard hit. Mortgage lenders and real estate investment trusts (REITs) face increased pressure due to higher borrowing costs. European borrowing costs also spiked, with Germany's 10-year bund yield reaching a 15-year high.

What to watch next: Investors await the May U.S. CPI data on June 10, which could further influence bond yields and inflation expectations. The next UK budget announcement, scheduled for June 22, may also impact gilt yields and the pound. Additionally, any developments in the Iran war could trigger further volatility in global bond markets.